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Why CQH Shares Rallied after the Buyout Announcement

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Stock price reaction

Cheniere Energy Partners LP Holdings (CQH) shares rallied 7.0% on Friday, September 30, 2016, after the announcement that Cheniere Energy (LNG) would acquire its remaining stake in CQH. Cheniere Energy (LNG) and Cheniere Energy Partners (CQP) rose 0.5% and 3.7%, respectively.

LNG, CQP, and CQH have risen 17.1%, 18.0%, and 31.1%, respectively, year-to-date. The Alerian MLP ETF (AMLP), which is comprised of 26 midstream energy MLPs, has risen 12.6%. CQP is a constituent of AMLP.

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How CQH shareholders benefit

The rally in CQH shares after the announcement could be attributed to the following benefits that shareholders are expected to enjoy from the transaction:

  • The transaction would result in increased exposure of CQH’s public shareholders in Cheniere’s LNG (liquefied natural gas) projects. Currently, CQH’s pubic shareholders have exposure to five liquefaction trains of the Sabine Pass LNG project. The exposure would increase that to seven LNG trains, including two trains of Cheniere Energy’s Corpus Christi project. For more details on these projects, read Cheniere Energy in 2016: What’s Driving the Bullish Sentiment?
  • Liquidity for CQH’s public shareholders would increase significantly. According to an investor presentation, the transaction would produce a ~32x increase in liquidity.

According to Jack A. Fuso, Cheniere Energy’s CEO (chief executive officer), “We believe the proposed transaction is attractive to investors in Cheniere Partners Holdings who, as new LNG shareholders, would have the opportunity to participate in the future success of the entire Cheniere complex.”

Analysts’ targets for LNG and CQH

At a broader level, 72.7% of analysts rate Cheniere Energy a “hold,” 18.2% rate it a “buy,” and the remaining 9.1% rate it a “sell.” CQP and CQH both have “buy” ratings from 75.0% of analysts.

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